Budget 2024: According to a Deloitte research, India is anticipated to explore expanding tax breaks on contributions and withdrawals in the forthcoming Interim Budget 2024, with the goal of increasing the appeal of the National Pension Scheme (NPS).
Targeting Seniors Over 75
The government may target people 75 years of age and older. Changes that may be revealed during Finance Minister Nirmala Sitharaman‘s February 1 Interim Budget presentation are expected as a result of this action. The employer contributions for employees’ corpus building currently differ. Companies are exempt from paying taxes on contributions made by them up to 10% of their base income and dearness allowances (for NPS, this is 12%, and for EPFO it is 12%).
PFRDA Advocacy for Tax Parity
According to The Economic Times, the Pension Fund Regulatory and Development Authority (PFRDA) is pushing for “parity” in taxation of employer payments with the Employees’ Provident Fund Office (EPFO). Deloitte has suggested making the annuity element of NPS tax-free for seniors over 75 in an effort to promote long-term savings through NPS and lessen tax obligations for those individuals.
Exemption Call for Seniors Over 75
In addition, there is a call to include NPS to the list of exemptions, along with pension and interest, so that seniors over 75 won’t have to deal with the burden of submitting returns if they have NPS income. As of right now, a lump-sum withdrawal of 60% is tax-free.
Under the new tax framework, there is also an increasing demand for tax discounts on NPS contributions. Currently, under Section 80CCD (1B) of the previous tax law, an individual’s payment to the NPS up to Rs 50,000 is deductible; however, under the new tax law, this contribution is not.
Additional Tax Benefit on NPS Contributions
This is on top of the Rs 1.5 lakh in tax benefit offered under the previous Section 80C. A committee headed by Finance Secretary TV Somanathan was established last year to examine the pension scheme and suggest improvements for government workers.
Anticipated Budget 2024 will ascertain whether modifications to the current framework and structure of the National Pension System (NPS) for public servants are required in order to reinforce pension benefits while maintaining budgetary responsibility for the benefit of the general public.
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